PDVSA’s 2020 bond payment that is due today is largely expected to go into default by tomorrow, but the collateral used to back the bond, the US-based Citgo refinery, may soon be separated from its disappointing parent.
The PDVSA bond payment due to is for $913 million, and pretty much no one is expecting Venezuela’s state-run oil company to make good on that payment. As it currently stands, defaulting on this bond payment would allow creditors owed the $913 million to seize Citgo shares.
But opposition leader has filed a lawsuit in New York to dispute the validity of using Citgo as collateral to back the PDVSA bond, using the argument that it did not have approval from the opposition-run congress to promise that, according to Reuters. When the bond swap was proposed years ago by then-President Nicolas Maduro, the National Assembly warned that any deal made without the express approval of the legislature would be null and void.
Citgo is now controlled by US-recognized President Juan Guaido, not Nicolas Maduro, after a painful period where both parties had tried to control the refinery. Citgo is now the most important asset that Guaido has at his disposal. Maduro, meanwhile, is left with its floundering parent, PDVSA.
Last week, the US Treasury Department issued a 90-day block on creditors looking to take hold of Citgo. The new guidelines as of last Thursday indicate that “transactions related to the sale or transfer of CITGO shares in connection with the PDVSA 2020 8.5 percent bond are prohibited, unless specifically authorized by OFAC,” until January 22, 2020.
That order bought Citgo sometime before today’s lawsuit could be filed requesting more permanent action.
Citgo Petroleum Corporation is one of the largest oil refineries in the United States, boasting revenue of $30 billion. The company’s refineries in Texas, Louisiana, and Illinois have a combined total refining capacity of around 749,000 barrels per day (bpd).